Court File and Parties
COURT FILE NO.: CV-14-841, CV-14-842 and CV-14-843
DATE: 2021-12-03
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: STIRLING FISHER and MICHELE NEUMAYER, Plaintiffs
-and-
WILLIAM SOROKA, Defendant
BEFORE: Mr. Justice I.R. Smith
COUNSEL: Steven Gadbois, Counsel, for the Plaintiffs David Steele, Counsel, for the Defendant
HEARD: November 26, 2021
ENDORSEMENT
Introduction
[1] The defendant, Mr. Soroka, asks me to invoke the jurisdiction of the Court, found in section 106 of the Courts of Justice Act, R.S.O. 1990, c. C-43, to stay the enforcement of foreclosure orders respecting several Kitchener properties made in favour of the plaintiffs by Justice Taylor on December 18, 2014. The defendant also asks me to restrain the plaintiffs from collecting any rent payments from the subject properties.
[2] The defendant seeks that stay pending (1) the disposition of his appeal to the Court of Appeal from the order of Justice Gibson on July 15, 2021 (see: Fisher & Neumayer v. Soroka, 2021 ONSC 4981), who declined to set aside Justice Taylor’s 2014 orders, and (2) the disposition of a motion to be brought before this court in which the defendant will seek a declaration that the foreclosures ordered by Taylor J. have been re-opened by the defendants, given their alleged claim for costs relating to the actions to obtain the foreclosure judgments, which costs were, according to the defendant, awarded to the plaintiffs by Gibson J.
[3] The defendant asks me to render a decision promptly and argues that he will be “homeless” and “destitute” in the absence of the stay he seeks.
[4] The plaintiffs oppose the stay.
The Facts
[5] The background facts are set out in Gibson J.’s endorsement and I will not repeat them all here. Suffice it to say that Gibson J. found the defendant’s claim that he and the plaintiffs had an agreement – whereby the plaintiffs would not proceed with the foreclosures – to be incredible. He found that the defendant had no arguable defence on the merits.
[6] To that, I add the following relevant facts derived from the additional evidence before me.
[7] The properties in question include the house in which the defendant lives and several rental properties. The plaintiffs advanced mortgages on these properties on which mortgages the defendant defaulted. The defendant has, however, continued to make the monthly payments on the first mortgages on the properties. He is able to do so, and to earn an “income”, because he has leased units in the properties to renters and collects the rent payments on those leases. He has not, however, paid taxes on the properties, nor has he paid the utility bills for them. He says that the rent he collects does not allow him to cover all these costs. As a result, the plaintiff was recently required to make a substantial payment ($152,044.39) for arrears in both taxes and utilities.
[8] In sum, the defendant lives rent- and tax-free in his house and does not pay the utilities for that house. He also pockets the difference between the rent payments he collects and the payments he makes on the first mortgages. The plaintiffs estimate, from the evidence available to them, that this profit is roughly $11,000.00 monthly (I note that the defendant has led no evidence before me about the amounts of his expenses, revenues and profits, or the value of his assets). Meanwhile, the plaintiffs bear the cost of insuring the properties, the taxes owing on them, and the utilities.
[9] Moreover, the plaintiffs are on title to the properties but the defendant acts as their manager. With limited exceptions, the plaintiffs do not know who the tenants are, do not know the terms of their rental agreements, do not know the extent of the defendant’s failure to maintain the buildings, do not know what the tenants are doing in the buildings, and do not know whether the terms of the plaintiffs’ insurance agreements are being respected. They argue that this puts them in a serious and dangerous position where they may unwittingly attract significant liabilities. I note that when the plaintiffs did attempt to communicate with tenants, through his counsel, the defendant voiced strong objection.
[10] As for the condition of the properties, the parties disagree. The defendant says that he maintains the properties and that he pays the costs of such maintenance, although he leads no corroborating evidence of same. While the plaintiffs cannot fully access the subject properties, they assert that the properties are in a state of disrepair and have not been properly maintained. The plaintiff Fisher deposes that the “properties have deteriorated to where they could fairly be characterized as slums.” Both sides have put photographs of the properties into evidence to support their respective positions. I think it is a fair assessment of the photographs as a whole to say that they show properties that are not well kept. All the photographs, however, are of the exteriors of the buildings only.
[11] Accordingly, the plaintiffs point to other evidence to establish the disrepair of the buildings. That evidence includes multiple work orders issued by the City of Kitchener demanding that various problems be remediated. Those problems include water leakage and damage, unsafe electrical fixtures, roof and eavestrough problems, unsafe floors, pest infestation, unsafe venting, a faulty toilet, garbage and waste accumulation, unmaintained lawns and other vegetation, walkways that are not cleared of snow and ice, unsafe or unmaintained interior and exterior walls, boarded up windows, and missing railings, among other issues. At the house in which the defendant himself lives, the City of Kitchener demanded the removal of all waste material from the exterior of the property, which it deemed to be “unsightly.”
[12] In September of this year, through counsel, the plaintiffs sent copies of Gibson J.’s order to each of the subject properties. In counsel’s covering letter, addressed to the “Occupants” at each address, he asked that the occupants provide information about their rental agreement with the defendant and demanded that any future rent payments be made to the plaintiffs.
[13] Only one of the occupants (to whom I shall refer by his initials, “DJ”) has since made contact with the plaintiffs. He has provided an affidavit for this motion. DJ reports that the furnace in his building does not work, that the bathroom fittings do not work, that leaks in the bathroom have rotted the floor, that the electrical fixtures require replacement, that the kitchen and bedroom have poor floors, that all of the windows are old and drafty, and that the defendant refused to remove a wasp’s nest on the property. He also notes that the shed on the property is full of “junk” and that there are rats and mice living in and around the property.
[14] DJ deposes that the defendant is rude and uses foul language when they communicate. DJ is intimidated by the defendant, whom he describes as “unstable”, “aggressive”, “confrontational” and as having “delusions and anger issues”. The plaintiff Fisher supports DJ’s claim that the defendant is intimidating. Mr. Fisher deposes that “due largely to fear of violence from Mr. Soroka, … he was left alone to manage the properties.”
[15] DJ says that the defendant unilaterally changed their rental agreement. DJ also says that he and the defendant agreed that the defendant would reimburse DJ for any materials purchased for repairs done by DJ to “make my house livable,” but that after the work was done, and DJ asked the defendant for reimbursement for materials, the defendant told DJ to “go fuck [him]self.” DJ says that the defendant also failed to honour an agreement which provided that DJ’s rent would be reduced in exchange for lawn maintenance and snow removal.
[16] The “Rental Agreement” signed by DJ and the defendant, which provides some support for DJ’s assertions respecting the repair and maintenance agreements described above, is a one-page handwritten document that is not compliant with the Residential Tenancies Act, S.O. 2006, C-17 (see, section 12.1).
[17] After receiving counsel’s letter on behalf of the plaintiffs, DJ paid his rent to them. That rent money is being held in trust. No other tenants of the subject properties have made payments to the plaintiffs, they have continued to pay them to the defendant. Upon learning that DJ had paid his rent to the plaintiffs, the defendant acknowledges that he told DJ (in a “non-threatening manner”) that he “wanted him out of the unit by the end of October.”
[18] Last, the plaintiffs challenge the defendant’s claim that the defendant is or could become “destitute”. They have led evidence showing that the defendant owns a commercial property at 160 Ottawa Street North in Kitchener which he purchased in 2011 for $400,000.00 and on which there is a mortgage of $100,000.00, taken out in September of this year. The defendant’s affidavit acknowledges that he “purchased a commercial property” in 2011.
The Test
[19] The parties are agreed on the test that I should apply in deciding whether to grant the stay requested by the defendant. That three-part test, described by the Supreme Court of Canada in R.J.R.-MacDonal Inc. v. Canada, 1994 117 (SCC), [1994] 1 S.C.R. 311, at para. 43, puts the onus on the defendant to show that (1) there is a serious issue raised by his appeal and/or his motion for a declaration; (2) he would suffer irreparable harm were the stay refused; and (3) the balance of convenience favours granting the stay he seeks.
Is there a Serious Issue?
[20] Given the view I take on the second and third branches of the three-part test, I am prepared to assume that there is a serious issue raised by the defendant’s request for a declaration and by his appeal to the Court of Appeal.
[21] Respecting the latter, however, I observe that the materials before me on this question are sparse. I have the defendant’s Notice of Appeal and the brief oral submissions made to me by counsel respecting that appeal, but, for example, I do not have the factum filed on the appeal, which I understand to have been perfected.
[22] Counsel advises that he will argue that Gibson J. misconstrued some of the evidence that was before him and failed to advert to other evidence which supported the defendant’s position. Counsel for the plaintiff describes the appeal as an “uphill battle” for the defendant given that it will turn on a credibility finding made against the defendant and given that so much of the defendant’s position relies on the conduct of his previous four lawyers in respect of whom the defendant refused to waive privilege.
[23] With respect to the defendant’s motion for a declaration that the plaintiff’s claim for costs, granted by Gibson J., has had the effect of re-opening the 2014 foreclosure orders, the defendant relies on the judgement of Laskin J. (as he then was) in the Supreme Court of Canada in Rushton v. Industrial Development Bank, [1973] 3 S.C.R. 552. He argues that some of the costs for which the plaintiffs were reimbursed related to the action which resulted in Taylor J.’s foreclosure orders. In Ontario, where a creditor chooses to foreclose and accept the property as satisfaction of the debt owing, it foregoes its right to any further claim against the mortgagor (see, for example: Re: Dor-O-Matic of Canada Inc. (1996), 1996 7965 (ON SC), 28 O.R. (3d) 125 (Gen. Div.), at para. 15; Re Lambert (2001), 2001 28474 (ON SC), 26 C.B.R. (4th) 235 (Ont. S.C.J.), at para. 74).
[24] Here, the defendant takes the position that some of the costs claimed by the plaintiff offend against this rule, and amount to a claim in addition to foreclosure. The result, so he will argue, is that the foreclosures have effectively been re-opened. As I have said, he seeks a declaration to this effect.
[25] I note that before Gibson J. the plaintiff specifically disclaimed any effort to recoup the costs of its actions which resulted in the foreclosure orders, and that Gibson J. accepted that assurance (see: Fisher & Neumayer v. Soroka, 2021 ONSC 5874, at para. 8). In addition, it seems to me that Rushton and the cases following it are distinguishable from the present case.
[26] In any event, the plaintiff focuses the majority of his submissions opposing the stay on the second and third branches of the RJR-MacDonald test, to which I turn now.
Will the defendant suffer Irreparable Harm?
[27] As Justices Sopinka and Cory wrote in RJR-MacDonald, “‘irreparable’ refers to the nature of the harm suffered, rather than its magnitude. It is harm which either cannot be quantified in monetary terms or which cannot be cured, usually because one party cannot collect damages from the other” (at para. 59).
[28] The defendant asserts that without the stay he seeks he will be rendered “homeless” and “destitute”. He says that the rent he collects is his sole source of income but does not say what that income is. As I have already observed, I have very little information respecting the defendant’s financial position apart from these bald statements. As the plaintiff notes, the defendant could have supplied that evidence to the Court and did not. One fact which is established, however, is that the defendant owns a property on Ottawa Street in Kitchener which was purchased for $400,000 a decade ago and on which there is a $100,000 mortgage.
[29] It seems to me that the harm relied upon by the defendant is harm that can be quantified in monetary terms: the loss of the rent money that he has been collecting while in default on the second mortgages, and the ability to live rent-free. I am not satisfied on the evidence before me that the defendant will be destitute, homeless or suffer irreparable harm if the stay is not granted. He has a valuable asset at his disposal. In other words, there is no reason that he should be homeless.
[30] In any case, in my view, this matter turns on the third branch of the test.
What is the Balance of Convenience?
[31] Under this branch of the test, I am required to consider which of the two parties will suffer the greater harm from the granting or refusal of the stay I am being asked to order. The list of considerations under this heading is not closed and varies from case to case (see RJR-MacDonald, at para. 63).
[32] I am satisfied in the circumstances of this case that the plaintiff is at risk of greater harm if the stay is granted than the harm to the defendant if it is refused.
[33] In this matter, as noted under the previous heading, the defendant risks eviction and losing rental income if the stay is not granted. The plaintiffs have greater risks if the stay is granted.
[34] First, they argue that rents payable on the rental properties should properly be paid to them, not to the defendant. If the defendant is, as he claims, in difficult financial straits, it is the plaintiffs who risk never collecting those rent payments from the defendant in the future.
[35] Second, the stay will perpetuate the windfall now enjoyed by the defendant at the expense of the plaintiffs: housing free of its expenses (other than servicing the first mortgages).
[36] Third, while a stay “is intended to offer some protection to an appellant against payments it may not have to make” (see Antunes v. Limen Structures Ltd., 2016 ONCA 61, at para. 11), in this case there is no doubt of the defendant’s debt to the plaintiffs. The parties differ only as to how that debt is to be satisfied.
[37] Fourth, as I have already observed, it does not seem to me that the either the appeal or the motion for a declaration is meritorious. I note that the appeal depends for the most part on convincing the Court of Appeal that Justice Gibson’s findings of fact and assessment of credibility were incorrect. That conclusion requires the Court of Appeal to find that Gibson J. committed a palpable and overriding error. This is a very high standard that is difficult to meet (see Antunes, at paras. 11 – 16, 26 – 28).
[38] Fifth, and relatedly, I take into account the fact that Gibson J. made strong findings of credibility against the defendant, who simultaneously blamed his former lawyers for his circumstances while refusing to waive privilege so that the plaintiffs could examine those lawyers (see Antunes, at para. 20). I add to that my own assessment of the credibility of the evidence before me. The defendant’s evidence has obvious gaps respecting his income, expenses, profits and assets, which I infer the defendant does not wish to share with the plaintiffs to whom he is indebted (see Antunes, at para. 21). Moreover, his evidence respecting the state of repair of the properties is contradicted by the more compelling evidence led by the plaintiffs.
[39] Sixth, if the stay is granted the state of the buildings is likely to continue to deteriorate. There are obviously significant problems with the properties which the defendant has failed to maintain despite his claims to the contrary. The plaintiffs hope to remediate the properties to make them safe.
[40] Seventh, and relatedly, maintaining the status quo, as the defendant urges, maintains the risk that the conduct of the defendant and/or the tenants has put the plaintiffs in breach of the terms of their insurance agreements. In other words, the risk of liability to the plaintiffs – which is beyond the control of the plaintiffs to avoid – will persist.
[41] Last, while the collection of rent payments is in issue between the parties, to the extent that the plaintiff has been collecting those rents, they are being held in trust (see Antunes, at para. 22). This practice protects the defendant if it is determined that the rent money in question ought to have been paid to him.
[42] In summary, I find that defendant has failed to establish that the balance of convenience favours him. I am satisfied that the balance of convenience weighs against the granting of the stay.
[43] For all these reasons, the motion is dismissed.
Submissions on Costs
[44] If the parties are unable to agree on costs, they may make brief written submissions to me respecting costs. The plaintiffs may file their submissions within 14 days of the release of this judgment. The defendants will have a further 7 days to file a response, if any. Reply, if any, will be filed by the plaintiffs within 3 days of the response.
[45] In the absence of submissions, I will assume that the parties have settled the issue of costs.
I.R. Smith J.
Date: December 3rd, 2021